Culper Research revealed short positions in Ether and ETH-related securities on Thursday, arguing that the post-Ethereum upgrade economy has deteriorated enough to put sustained pressure on the token. The company directly pointed to Fusaka’s December 2025 Ethereum upgrade and Vitalik Buterin’s recent sales as evidence that “ETH is going down.”
“NEW: We short Ether ETH, and securities related to ETH, including BMNR,” Culper wrote about X. “We think the ETH tokenonomics is broken after the Fusaka update in December 2025. Vitalik knows this and is selling, while the most ardent ETH bull, Tom Lee, is throwing money after the bad.”
Why is Culper Shorting Ethereum?
Culper’s main claim is that L1 Fusaka’s scale changes have significantly changed the dynamics of Ethereum’s demand than expected. The company pointed to an increase in the gas limit of “45 to 60M”, which it says is intended to expand the Ethereum base layer, along with estimates that “Vitalik and PTG” believe that fees will decrease by 10% to 30%. Culper claims that the practical result was much worse: “In fact, gas fees decreased by ~90%,” it wrote, adding that Ethereum management and validators “miscalculated the elasticity of L1 requirements by 3-9 times for old math (pre-EIP-1559 and pre-L2s).”
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Culper argues that compressing payments is important because it translates into an economy of validation and incentives. “Furthermore, the increase in gas limits has killed $ETH validators, who are now seeing 40-50% less tips per gas,” Kalper said, claiming that the low yield will reduce demand for staking and “high-cost activity” and hinder institutional adoption. “Mavovik now works in reverse.”
The thread frames Tom Lee and BMNR as a top heavyweight in the ETH bull camp and then tries to debunk his post-improvement reading. Culper said Lee defended Ether by claiming: “ETH is not in a death spiral because utilities are going up.” According to Culper, Lee cited the increase in active addresses and transaction accounts after Fusaka as evidence of “strengthening fundamentals” and institutional acceptance.
Culper’s rebuttal is blunt and largely complimentary: “By Lee’s own logic, if ETH’s performance does not reflect increasing utility and strengthening fundamentals, then $ETH will be in a death spiral.” “Our research says that’s exactly what it is.”
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To explain the increase in activity, Culper said that an analysis of the chain’s data from January 2025 to February 2026 shows that most of the growth is not organic use, but the toxic wave of low-value addresses and the dusting of wallets with cheaper space. “Post-Fusaka: 95% of the increase in new wallets is explained by the newly created ‘dusting’ wallets,” Kalper wrote, adding that poisoning attacks have “more than 3 times” that poisoning explains “> 50% of the increase in $ETH transactions” and that it now accounts for “22.5% of all ETH transactions”.
Culper said it was the first to confirm the phenomenon, claiming that it created two new wallets, transferred between them, and became the target of poisoning attacks “within 5 minutes,” while claiming that poisoning losses “have already increased by 8 times compared to pre-Fusaka.”
Vitalik is sold
The company also tried to tie its Tokenomics thesis to Buterin’s recent sales activity, portraying it as informed sales rather than typical fund management.
“This is why we think Vitalik is selling ETH by the fistful. On January 30, Vitalik previously announced that he was selling 16,384 ETH to finance the Fund’s “austerity period”. Since then, he has sold more than 19,300 ETH and counting,” Calper wrote. “He knows what Tom Lee doesn’t: ETH’s tokenomics is broken.”
Expanding on the bear case, Culper ended a competitive narrative, claiming that Ether is losing share to Solana and Ethereum’s own L2s, and likening ETH’s current position to the incumbents who led the early days before being displaced.
At press time, ETH was at $2,080.
Featured image created with DALL.E, chart from TradingView.com
